Jennifer Westacott Talks to the ABC Radio National Breakfast Program

21 April 2011

Transcript of comments made by BCA Chief Executive Jennifer Westacott to Fran Kelly of the ABC Radio National ‘Breakfast’ program on 21 April 2011.

‘Business Council Changes Tune and Criticises Carbon Price’, first broadcast on Radio National Breakfast on 21 April 2011, is reproduced by permission of the Australian Broadcasting Corporation and ABC Online. (c) 2011 ABC. All rights reserved.

Fran Kelly: The Business Council of Australia has appointed a climate change expert as its new chief executive. Jennifer Westacott was a former partner with the accountancy firm, KPMG, where she ran the firm’s climate change and water practice.

Her appointment to the BCA comes as the nation’s peak business lobby steps up its criticism of the federal government and its carbon pricing policy. Last week, the President of the BCA, Graham Bradley, wrote an open letter to Julia Gillard arguing that Australia should act in tandem with the rest of the world, not ahead of it.

Jennifer Westacott joins me now in the Breakfast studio. Jennifer, welcome to Breakfast.

Jennifer Westacott: Good morning, Fran.

Fran Kelly: Congratulations on the appointment.

Jennifer Westacott: Thank you very much.

Fran Kelly: Does the Business Council support Australia’s bipartisan five per cent reduction target and the use of a market-based approach to get there?

Jennifer Westacott: Well, as our letter to the Prime Minister clearly says, we accept that the government has set this target and has got bipartisan support. Our task is to get a workable approach to achieving the target.

In respect of a market-based mechanism, we’ve made it clear that the BCA has had a longstanding position that you need a multifaceted approach to tackle climate change, but that a central element of that is a market-based mechanism of which we define as a well-designed cap-and-trade system. And we believe a well-designed cap-and-trade system is the best way of reducing emissions at the least cost to the economy.

Fran Kelly: Okay. So BCA supports a cap-and-trade system or a market mechanism. Your President, Graham Bradley, wrote to the Prime Minister last Friday saying, among other things, that putting a price on carbon could damage the country’s export competitiveness and drive production offshore.

Now how can it damage the country’s competitiveness if it’s doing exactly what the BCA is supporting? It’s a market mechanism.

Jennifer Westacott: Well what we were doing in that letter was alerting the Prime Minister to our fundamental three threshold issues in designing a price on carbon. The first is that we have to protect our trade-exposed industries and we have to do that in respect of what is actually happening in competitor countries in respect of those industries, what’s actually happening.

And secondly that we have to create an environment that encourages long-term investment in the electricity sector. And thirdly that fundamentally this has to contribute to a reduction in greenhouse gas emissions over the long term globally.

So they were our three issues that we put to the Prime Minister, saying these are our threshold issues. These are the things we want to address. And we are committing to working constructively with the government throughout the consultation process to address them.

Fran Kelly: But the government is actually pledging the same level of compensation for the trade-exposed industries as under the CPRS, the original CPR – well, the CPRS of 2009, which the BCA supported. So why not support it this time?

Jennifer Westacott: Well I think it’s important that people are cognisant that things have changed since then. So firstly we always said, and it’s important to get this on the record, that there were things that had to be worked out in the implementation of the CPRS.

But things have changed. Now firstly we’ve had a global financial crisis and many sectors of the Australian economy are still soft. Secondly, we have not seen uniform action by our competitor countries to put a price on carbon. So yes, they’re taking action on climate change, but not necessarily putting a price on carbon.

Fran Kelly: But just on that, in 2009, a statement from the BCA President, Graham Bradley, said, and I’ll quote from the press release: these policies must enable emissions reductions to be achieved at least cost to the economy, maintain the reliability and viability of the domestic electricity industry and maintain the competitiveness of Australia’s industries in the absence of a global price on carbon.

So it was factoring in the fact that the rest of the world wasn’t going to necessarily have a price on carbon.

Jennifer Westacott:Yes, but let’s go back to what I was saying about what’s changed. We’ve had two fundamental changes that I’ve gone through. But also what the government’s put on the table is a different proposition. So what we’ve got now is not an emissions trading scheme. We’ve got a high …

Fran Kelly: It will ultimately be an emissions trading scheme.

Jennifer Westacott: Yes. But one of the kind of critical things that we don’t know is how long the fixed price period will go on for, what will be the trigger points to move to a trading scheme.

And I think, Fran, one of the fundamental things that’s different about this scheme and that drives us to say that the compensation arrangements need to be cognisant of this, is that under the original CPRS companies could either reduce their emissions in Australia or they could reduce them overseas.

Now all of the detail hasn’t been worked out yet. But what we know, so far, is that capacity to reduce emissions overseas is not available in the fixed price period. So what have companies got as a choice? They can either reduce their emissions in Australia or they can pay a price.

Now some of the industry sectors are not able, in a technology sense, to reduce those emissions in the fixed price period. So that means they’ll be simply paying a price. That’s a higher cost to business. And that may impact on our competitiveness.

Fran Kelly: Okay. Treasurer, Wayne Swan, had a crack at the BCA yesterday. He thinks the BCA has changed its tune on climate change. Let’s have a listen.

[Excerpt] Wayne Swan: Yes, slightly surprising that the Business Council doesn’t quite seem to be in the same cart they were in for pricing carbon last time. But I’ll tell you what, there’s a lot of companies sitting here in this room, with very big investments, that have already factored in the price of carbon in their investment plans. [End of excerpt]

Fran Kelly: That’s Wayne Swan, speaking yesterday. And some economists do agree with the Treasurer that, if you do believe we need to take action on climate change, it’s better to start making the gradual structural shift in the economy now to bring about carbon reform, even if the rest of the world is moving at different speeds, rather than hit with the sudden shock when the US finally comes onboard.

Jennifer Westacott: Sure. And let’s be really clear what we’re saying. We’re saying it’s the transitional arrangements that need to be carefully thought through and they need to be carefully thought through in the light of the context that we’re now operating in. And of course, it’s absolutely important that we build into the economic cycle now a way of reducing our greenhouse gas emissions.

But that must be done in a way that protects the competitiveness of our trade-exposed industries and continues to have investment in the electricity sector. So that’s really all we’re saying, Fran. A careful attention to the transitional arrangements is fundamental to getting this right and getting it workable for the Australian economy.

Fran Kelly: The federal Budget is looming. The government’s warning it will have to make deep spending cuts if it’s to deliver a budget surplus. The BCA has urged fiscal discipline in its submission to the government. So which government spending areas would you like to see pared back?

Jennifer Westacott: Well I don’t think it’s really for us, Fran, to tell government what areas it should reduce. We want to see four things in this budget. We want to see evidence that the government is on-track to deliver a surplus in 2012–2013. We want to see a renewed commitment to Infrastructure Australia and a long-term infrastructure plan.

We want to see a comprehensive skills package to address our skills shortages. And we’ve called for greater accountability and transparency and the establishment of a commission of budget integrity, so that there’s an independent review of government priorities and to ensure that taxpayers are getting value for money.

So that’s our kind of fundamental ask of the government. It’s not really for us to say that the government, what areas the government should cut, other than to say it’s absolutely responsible and sound economic policy to get back into surplus as quickly as possible. It’s essential we get the budget discipline back on track.

And one of the things we would say that, as part of the budget package it’s absolutely critical that government invest in workforce participation and the skills package.
 
Fran Kelly: Alright. Jennifer Westacott, thank you very much for joining us.

Jennifer Westacott: You’re welcome. Thank you.

Fran Kelly: You’ve come into your new role at a pretty hot time for the BCA.

Jennifer Westacott: Thank you very much.

Fran Kelly: Jennifer Westacott is the new Chief Executive of the Business Council of Australia. She just started work this month.

The Business Council of Australia does not guarantee the accuracy of this transcript, which was supplied by an external transcription service.